December 7, 1998
Hersha Hospitality Trust
148 Sheraton Drive, Box A
New Cumberland, Pennsylvania 17070
Hersha Hospitality Trust
Qualification as
Real Estate Investment Trust
Ladies and Gentlemen:
We have acted as counsel to Hersha Hospitality Trust, a
Maryland real estate investment trust (the "Company"), in connection with (i)
the preparation of a Form S-11 registration statement (the "Registration
Statement") filed with the Securities and Exchange Commission ("SEC") on June 4,
1998 (No. 333-56087), as amended through the date hereof, with respect to the
offering and sale (the "Offering") of 2,275,000 Priority Class A common shares
of beneficial interest, par value $0.01 per share, of the Company (the "Priority
Common Shares") and (ii) the Company's contribution of the net proceeds of the
Offering to Hersha Hospitality Limited Partnership, L.P., a Virginia limited
partnership (the "Operating Partnership"), in exchange for a general partnership
interest in the Operating Partnership. You have requested our opinion regarding
certain U.S. federal income tax matters in connection with the Offering.
The Company has contracted to acquire, through the Operating
Partnership, interests in ten hotels and associated personal property (the
"Hotels"). Upon the acquisition of the Hotels, four of the Hotels will be owned
by the Operating Partnership and eight of the Hotels will be owned by the
following subsidiary partnerships (the "Subsidiary Partnerships"): (i) 1244
Associates, a Pennsylvania limited partnership, (ii) 1444 Associates, a
Pennsylvania limited partnership, (iii) 1644 Associates, a Pennsylvania limited
partnership, (iv) 844 Associates, a Pennsylvania limited partnership, (v) 944
Associates, a Pennsylvania limited partnership, and (vi) MEPS Associates, a
Pennsylvania limited partnership. Hersha Hospitality, LLC, a wholly-owned
subsidiary of the Operating Partnership ("Hersha LLC"), is the general partner,
and the Operating Partnership is the limited partner, of each Subsidiary
Partnership. The Operating Partnership and the Subsidiary Partnerships plan to
lease the Hotels to Hersha Hospitality Management, L.P., a Pennsylvania limited
partnership (the "Lessee"), pursuant to substantially similar operating lease
agreements (the "Leases").
In giving this opinion letter, we have examined the following:
1. the Company's Amended and Restated Declaration of Trust, in the form filed as
an exhibit to the Registration Statement;
2. the Company's Bylaws, in the form filed as an exhibit to the Registration
Statement;
3. the Registration Statement, including the prospectus contained as part
thereof (the "Prospectus");
4. the Agreement of Limited Partnership of the Operating Partnership, dated May
27, 1998, between the Company, as general partner, and Hasu P. Shah, as limited
partner;
5. the Amended and Restated Agreement of Limited Partnership of the Operating
Partnership (the "Operating Partnership Agreement") among the Company, as
general partner, and several limited partners, in the form filed as an exhibit
to the Registration Statement;
6. the Amended and Restated Limited Partnership Agreement of 1244 Associates
between Hersha LLC, as general partner, and the Operating Partnership, as
limited partner, in the form to be executed at closing;
7. the Amended and Restated Limited Partnership Agreement of 1444 Associates
between Hersha LLC, as general partner, and the Operating Partnership, as
limited partner, in the form to be executed at closing;
8. the Amended and Restated Limited Partnership Agreement of 1644 Associates
between Hersha LLC, as general partner, and the Operating Partnership, as
limited partner, in the form to be executed at closing;
9. the Amended and Restated Limited Partnership Agreement of 844 Associates
between Hersha LLC, as general partner, and the Operating Partnership, as
limited partner, in the form to be executed at closing;
10. the Amended and Restated Limited Partnership Agreement of 944 Associates
between Hersha LLC, as general partner, and the Operating Partnership, as
limited partner, in the form to be executed at closing;
11. the Amended and Restated Limited Partnership Agreement of MEPS Associates
between Hersha LLC, as general partner, and the Operating Partnership, as
limited partner, in the form to be executed at closing;
12. the Form of Lease between the Operating Partnership and the Lessee, in the
form filed as an exhibit to the Registration Statement;
13. the Form of Administrative Services Agreement between the Company and the
Lessee in the form filed as an exhibit to the Registration Statement; and
14. such other documents as we have deemed necessary or appropriate for purposes
of this opinion.
In connection with the opinions rendered below, we have
assumed, with your consent, that:
1. each of the documents referred to above has been duly authorized, executed,
and delivered; is authentic, if an original, or is accurate, if a copy; and has
not been amended;
2. during its short taxable year ending December 31, 1998 and future taxable
years, the Company will operate in a manner that will make the representations
contained in a certificate, dated November 30, 1998 and executed by a duly
appointed officer of the Company (the "Officer's Certificate"), true for such
years;
3. the Company will not make any amendments to its organizational documents, the
Operating Partnership Agreement, or the partnership agreements of the Subsidiary
Partnerships (the "Subsidiary Partnership Agreements") after the date of this
opinion that would affect its qualification as a real estate investment trust (a
"REIT") for any taxable year;
4. each partner of the Operating Partnership (a "Partner") that is a corporation
or other entity has a valid legal existence;
5. each Partner has full power, authority, and legal right to enter into and to
perform the terms of the Operating Partnership Agreement and the transactions
contemplated thereby; and
6. no action will be taken by the Company, the Operating Partnership, the
Subsidiary Partnerships, or the Partners after the date hereof that would have
the effect of altering the facts upon which the opinions set forth below are
based.
In connection with the opinions rendered below, we also have
relied upon the correctness of the representations contained in the Officer's
Certificate. Furthermore, where such factual representations involve matters of
law, we have explained to the Company's representatives the relevant and
material sections of the Internal Revenue Code of 1986, as amended (the "Code"),
the Treasury regulations thereunder (the "Regulations"), published rulings of
the Internal Revenue Service (the "Service"), and other relevant authority to
which such representations relate and are satisfied that the Company's
representatives understand such provisions and are capable of making such
representations.
Based on the documents and assumptions set forth above, the
representations set forth in the Officer's Certificate, and the discussion in
the Prospectus under the caption "Federal Income Tax Consequences" (which is
incorporated herein by reference), we are of the opinion that:
(a) commencing with the Company's short taxable year beginning
on the day before the closing of the Offering and ending December 31,
1998, the Company will qualify to be taxed as a REIT pursuant to
sections 856 through 860 of the Code, and the Company's organization
and proposed method of operation will enable it to continue to meet the
requirements for qualification and taxation as a REIT under the Code;
(b) the descriptions of the law and the legal conclusions
contained in the Prospectus under the caption "Federal Income Tax
Consequences" are correct in all material respects, and the discussion
thereunder fairly summarizes the federal income tax considerations that
are likely to be material to a holder of the Priority Common Shares;
and
(c) the Operating Partnership will be treated for federal
income tax purposes as a partnership and not as a corporation or an
association taxable as a corporation or as a publicly traded
partnership.
We will not review on a continuing basis the Company's
compliance with the documents or assumptions set forth above, or the
representations set forth in the Officer's Certificate. Accordingly, no
assurance can be given that the actual results of the Company's operations for
any given taxable year will satisfy the requirements for qualification and
taxation as a REIT.
The foregoing opinions are based on current provisions of the
Code and the Regulations, published administrative interpretations thereof, and
published court decisions. The Service has not issued Regulations or
administrative interpretations with respect to various provisions of the Code
relating to REIT qualification. No assurance can be given that the law will not
change in a way that will prevent the Company from qualifying as a REIT.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement. We also consent to the references to Hunton &
Williams under the captions "Tax Status," "Tax Risks," "Federal Income Tax
Consequences," and "Legal Matters" in the Prospectus. In giving this consent, we
do not admit that we are in the category of persons whose consent is required by
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder by the SEC.
The foregoing opinions are limited to the U.S. federal income
tax matters addressed herein, and no other opinions are rendered with respect to
other federal tax matters or to any issues arising under the tax laws of any
other country, or any state or locality. We undertake no obligation to update
the opinions expressed herein after the date of this letter. This opinion letter
is solely for the information and use of the addressee and the purchasers of the
Priority Common Shares pursuant to the Prospectus, and it speaks only as of the
date hereof. This opinion letter may not be distributed, relied upon for any
purpose by any other person, quoted in whole or in part or otherwise reproduced
in any document, or filed with any governmental agency without our express
written consent.
Very truly yours,
Hunton & Williams